How GEMA Is (Still) The Worst 'Collective Rights' Organization In The World

from the €75-für-summte-99-Luftballons-versehentlich dept

We've discussed GEMA's antagonistic attitude towards, well, pretty much everyone other than itself. In addition to turning the German YouTube experience into a farcical collection of "Sorry" faces and demanding fees for music it doesn't even control, GEMA has also been in the news due to its rollout of a "streamlined" fee structure that threatens the existence Germany's underground club scene with unsustainable licensing rates.

Luis Manuel Garcia at Resident Advisor has put together a very thorough and excellently written rundown of the recent events, covering GEMA's attempts to "streamline" its licensing fee structure (and its adverse effects) and explaining some of the organization's idiosyncrasies. (This is a very nice word for GEMA's thuggish tactics that go beyond villainy to cartoonish supervillainy.) There are a few differences between GEMA and other performance rights organizations (BMI, ASCAP, PRS, etc.). Much of this has been covered here before at Techdirt, so I'll give you some of the high/low points of GEMA's services, with some added details from Garcia.

Rather than being limited to "public performance rights," GEMA handles "collective rights management" for its 64,000 German members and 2,000,000 worldwide members. GEMA still collects licensing fees from businesses but its power goes much, much further than ASCAP's or BMI's.

GEMA decides how to distribute your work... and at what price.

This means that music-makers don't sign over ownership of their music upon joining GEMA, they sign over their usage rights—the right to legally manage and collect licensing fees for playback, reproduction and broadcast of their music. This is a convenient arrangement when you're a small-time musician who doesn't have the time or money to manage your catalogue; but these management decisions are taken out of your hands. If you want to grant a free license to a charity event or offer a reduced fee for a career-advancing event, you'll find that decision isn't yours to make.

All music is assumed to be under GEMA's control unless the artist can prove otherwise.

This distribution scheme is unlikely to change in the hands of GEMA. Its so-called "full members" (members who have achieved over €30,000 in GEMA revenue over a five-year period) are the only members allowed to vote on issues or hold controlling positions. Any artist not within this elite group has to watch his or her fees being redistributed to already wealthy artists while being prevented from attempting to effect any change in the prevailing structure.

GEMA assumes (like other PROs) that every venue plays only music from top-selling artists.

For underground music venues that mainly feature non-mainstream and independent artists—like many dance music clubs—this means that a portion of the fees collected for these events will likely find their way into the bank accounts of mainstream artists and advertising jingle writers, whose music was never played during the event, while some artists will never see a single cent for their music, however popular it may be.

GEMA splits music into three categories which affect rates collected and royalties paid and arbitrarily decides for the artists what category their music falls under.

It classifies music into three categories: entertainment [Unterhaltungsmusik], serious music [Ernste Musik] and functional music [Funktionsmusik]. It then subjects these categories to different fee rates, membership requirements and weighting in the points system they use to calculate royalties. Unsurprisingly, U-Musik gets the worst of this arrangement, having the highest membership requirements, the highest fee rates and the lowest values for royalty calculations

Unlike other PROS, GEMA is a "for-profit" organization that enjoys a government-granted monopoly and legal powers.

Making all of this worse is the fact that GEMA is a private interest "for-profit" organization, unlike most PROs which operate under a "non-profit" status. GEMA also operates as a monopoly, a problem made worse by the German government's decision to grant it legal power to "protect" the rights of its members.

How GEMA went from bad to worse

For years, the German government seemed to have no problem with GEMA's tactics and monopolistic operation. In fact, its only complaint was directed at GEMA's complex fee structure. GEMA responded to this by streamlining its rates with a clear eye on maximizing income. It was required to negotiate these changes with club owners and other affected parties, but its monopoly position basically turned the discussion into GEMA stating, "Here are your new fees," and walking away from the table.

Negotiations broke down sometime in late 2011, however, and an attempt to initiate legal arbitration failed as well. GEMA therefore decided to go ahead without the negotiations or arbitration and published a new tariff structure in the Bundesanzeiger (Federal Gazette) in April 2012, which effectively made the new tariffs legally-binding.

Now, the venues being hit hardest were nightclubs, especially underground clubs that catered to non-mainstream crowds and played non-mainstream music. GEMA's "streamlined" fee structure was built from the sort of opportunistic math that could only come from a self-interested monopoly. Any concessions to reality were thrown out the window in search of higher fees.

GEMA's opportunistic math

First, GEMA killed off yearly flat rates and replaced them with "per-event" charges. Supposedly, this was to "balance" fees between large and small venue owners. GEMA even claimed this would reduce fees for 60% of its "customers." But once it applied its GEMA-friendly calculations, everyone was guaranteed to see an increase in licensing costs.

GEMA calibrated the new rate for dance clubs (Tarif M-V) with the goal of charging approximately 10% of the gross income for a music event. Of course, they don't trust organizers to self-report their revenues accurately, so they estimate the gross income based on venue size and price of entry, and then charge 10% of that.

This estimation is based on three assumptions: 1) the capacity of a venue is one person per square-meter, measured wall-to-wall (i.e. beyond the dance floor and ignoring solid objects like furniture); 2) the event is full to capacity; 3) everyone is paying full price for entry.

This sort of mathematical assumption would ruin any normal business. Fortunately for GEMA, it's a government-ordained monopoly which exists solely to extract fees. The more it extracts, the healthier it is. Under the old flat-rate structure, a 500 square meter club would have paid around €7,800 annually. Under GEMA's new plan, this leapt to over €78,000.

When club owners complained about this exorbitant rate hike, GEMA responded (belatedly) with a nominal attempt at "fairness."

In answer to complaints about these distorted results, GEMA later introduced the Angemessenheitsregel (appropriateness rule), which allows promoters to apply for a partial refund if GEMA fees are well over 10% of actual gross income or if the venue's capacity is well under GEMA's one person / m2 ratio.

In other words, club owner would still need to pay up front and hope GEMA would cut them a (partial) refund check sometime in the next several months. Seeing as GEMA doesn't trust club owners to honestly self-report revenues (hence the lousy fee structure), it wouldn't be surprising if it decided these refund requests were dishonest as well, and rejected a majority of them.

This rate hike hit underground clubs hardest, but GEMA wasn't done punishing them yet. GEMA also levied a rate hike based on the length of the event, jacking the rate up by 50% once the event passed 5 hours and adding another 50% hike every two hours after that. This led to astronomical charges for clubs that routinely ran 10-hour-plus events or operated around the clock. As more outrage poured in, GEMA dialed this back to a 25% increase every two hours after the 8-hour mark -- not as bad, but still unaffordable.

Obviously, GEMA felt it still wasn't making enough money from these events, so it decided to start double-dipping by cramming its hands into the DJs' pockets.

[I]n late November GEMA announced another tariff, VR-Ö, which became known as the "laptop surcharge." It applied to all music performances that use blank media such as CDs, tapes, USB sticks and hard-drives. This already existed in the past as an automatic 30% surcharge on the entirety of GEMA music licensing fees if any of the DJs used mp3s or burned CDs. Now, the surcharge would no longer be a percentage of the fees, but would instead be calculated at 0.13€ for every mp3 file on the DJ's computer. Every song over five minutes costs an extra 20% per minute. Performers and promoters all over Germany were not pleased, especially since the rate appears to charge all files on a DJ's performing device, regardless of how many songs they actually play.

The backlash

All of this led to protests against GEMA and its club-killing license fees. A petition managed to gather enough signatures to get the government's attention. The German government looked into GEMA's fee structure and its opportunistic club revenue calculations. GEMA reentered negotiations with artists' representation and rolled back its fee structure to its pre-"streamlined" levels. It also adjusted its "laptop surcharge" to a flat rate of 50 euros per 500 songs, making this more affordable for DJs, if not actually any less presumptuous and stupid. (RA says some Germans feel this is nothing more than an opportunity for GEMA to jack the rates later on its newly collected list of registered DJs.) There's also been a call for German legislators to craft policies to regulate GEMA's actions.

The outcome of this controversy has been a little better than expected, considering GEMA's horrible track record. Still, as is evidenced by GEMA's ongoing battle with Google/YouTube, the rights organization still has a long way to go before it will be considered anything other than predatory and overbearing. German artists should at least be given the chance to opt out without having to jump through GEMA's hoops.

And all rights organizations should start making an honest effort to track actual usage, rather than simply throwing more money at those artists who already have plenty. It's 2013 and the technology exists to make this possible. PROs (and GEMA) are simply being willfully obtuse by pretending they can't do anything better than cut checks while eyeballing the latest Billboard chart.

the first thing the German Government should have done is find out who signed the bill into being that gave all these 'rights to GEMA'. after that, a full investigation should have been conducted to find out what the 'rewards' were for the ones that signed off on GEMA. the progression should then have been natural to see what power it really has, how it has been using it and what rights the artists have had taken away. this is the sort of thing that happens when an entertainment industry is given 'carte blanche' to do what it likes with no regulation or oversight from the government and i mean un-encouraged' members of the government of course (i understand that there are still a few about, even though they get shouted down and ridiculed frequently by those that do accept 'encouragement')

Re:

"Now, the surcharge would no longer be a percentage of the fees, but would instead be calculated at 0.13€ for every mp3 file on the DJ's computer. Every song over five minutes costs an extra 20% per minute."

If you need any evidence that this whole thing is not only ridiculous, but clearly gamed to benefit only the commercial chart music end of the market, here it is.

Crappy commercial DJs only interested in playing the latest major label pop songs most likely come out paying very little. Non-commercial DJs will tend to not only have a lot more songs (in part because they're reacting to the mood of the dancefloor, not just going "yeah, let's play that new Rihanna song again!"), but most genres popular in Germany such as trance and techno will often have songs of 10-15 minute in length. Are you a newcomer making a name for himself in those genres? The club will lose money by giving you the opening slot, and you'll probably spend your booking fee just to be allowed to carry your music into the venue (for which the artists making those tunes will probably not see a penny).

So, play major label approved pop songs? You won't pay much. Play underground music that will never be found on any approved commercial outlet? Pay through the arse, and the money still goes to the crappy pop artists instead of the people making the music being played. How convenient.

Re: Conspiracy Theory.

um, the issue with PROs is actually different. It's actually the equivalent of regulatory capture- the major rightsholders actually wield quite a lot of power over PROs). Therefore, why would the major rightsholders let the PROs change the distribution ssytem when it would hurt them?

German entertainment

All of this, yet the German entertainment industry is strong and robust, with a full on entertainment industry in all it's flavors. Music, movies, written word, and so on are all very strong considering that this is single language market that doesn't generally translate well.

All this stuff about GEMA, yet things are going great. Do you honestly think things could be significantly better without them? Why? Where? How? Who would benefit?

Re: Re: German entertainment

Re: German entertainment

You don't see how things could be better without a mandatory collection agency that takes money for performances of music they don't own and gives it to big stars instead of the people who made the music in question? You don't see how raising the costs for venues by a factor of 10 could make things worse than if they didn't collect at all?

Why?
They would not have to worry about being extorted for wanting to play music at their premises/event.

Where?
All over the place

How?
See Why

Would things be better without them?
Clearly, yes. Local economy would improve, independent musicians would actually get paid, the public could enjoy their music and less stress for anyone organising an event that needs music.

Re: German entertainment

Not only GEMA

Seriously people think this is only done in Germany, i am sure if there were investigations into the publishing and music and video industry through the world one would find that most do exactly the same, they just manage to hide it better. Yes the fees might not be so high but if anyone thinks the artists are getting what is owed to them i think you are ignoring reality.

Just one simple question. Does anyone think it is right that an artist will get less than a penny for each track on a cd they sell. Seriously, when the studios are making an absolute fortune and the artists are in most cases unable to live of the money they get for their works.

I see a future very very soon where someone comes up with a whole new business model and manages to get the artists the fees they deserve. Where and artist can upload an album and get 90% of the profits from the sale or use of that album.

I see a future where GEMA is requested to stop attacking other businesses that are selling music on the artists behalf, where all music in a club is sourced from a non GEMA business entity and GEMA is told to fuck off when they come calling.

I see a future where German artists join the rest of the world in boycotting GEMA and suing them if they attempt to use their content to generate any income that does not go directly to the artist.

I see a future where music is free to listen to and that although they pay to use music in clubs it will be payments made to the artist directly and not to a collection agency.

The future is something along the lines of MEGABOX or MEGAMUSIC or something similar, and no i do not mean the business run by Kim Dotcom , but the businesses that will develop from his ideas and his implementations of the new business models musicians will use to get the control of their content back into their hands.

I don't doubt that MEGA will be eventually trying to make much more form the artists content, or that they will try to lock the artists into a lifetime agreement. But if they managed to create an environment where MEGA only ever gets 10% of the profits then i think Musicians can be compensated properly.

Any agreements MEGA creates will be protecting themselves from music labels coming and buying up the top artists and using MEGA as a way to identify popular musicians and steal them away.

The whole music industry is on the cusp of change in a massive way, this is why i suspect Kim was attacked as he was, and why i think he could possibly be killed in the future, he is going to be taking billions in profit away from some very powerful people.

Re: Not only GEMA

There is already a world for Indie musicians but the problem is the old industry are still the gatekeepers. Lets see them try to appear on the TV or Radio even if they were very popular.

Sure they can have their music play in nightclubs etc but again GEMA is the only authorised collection agency.

Monopolies are very bad for the music industry where the problem is musicians can only gain extra opportunities through signing away their rights.

There are then many tales of woe as the industry rapes and trashes the musicians. Like one case I heard of where the record label closed down invalidating all contracts while the music copyrights were then sold on to a new label who could then sell the music while paying the musicians zero.

The industry is corrupt to the core where the only logical step is the trash the whole system and then to start afresh for a new digital age based on musician rights and fairness.

Okay, so the legal writing says MP3. Quick solution...convert all audio tracks to OGG or some other format. If you want to have songs longer than 5 minutes, simply rerecord them at a faster speed, and then in your playback program, slow them down.

Re:

Da Shit

GEMA is really the worst collection agency ever.

Mostly all websites like YouTube refuse to work with GEMA when they are too unreasonable and their fees too extreme. As a result GEMA is making a large loss from the Web when local citizens just by-pass these German limits.

So there is GEMA wanting to rebalance this loss through raping music venues and nightclubs in extreme new changes where it is little surprise that this market freaked out.

Naturally everyone hates GEMA when by not cutting fair deals the public can't see the music videos they want to see and the musicians are not being paid.

I also can't see how any musician could welcome a 10% income drop just to give it to more popular musicians. I can't even think of an industry that works the same way when that is like "Fred you did a good job building this hotel and here is your wages but we cut out 10% to give to this famous bridge builder instead!"

Well in conclusion people can sit in the toilet and squeeze out a better smelling collection agency than what GEMA is.

It seems that GEMA is another example of how monopolies naturally run away from logic and usefulness. Their activities don't make much sense in the way that it should support the various cultural groups that make up a healthy society. It is not a far toss to say that their method of operations suppress the spread and creation of new culture.

Since GEMA is a government granted for profit monopoly its likely to be just as belligerent, corrupt and horrible as the great majority of other monopolies in history. Zero surprise. Whats to like about them at all? Seemingly another music licensing organization that operates more like organized crime than a legitimate business in good standing.

GEMA makes their own rules seemingly answering to a small self profiteering group. Their enforcement is guilty until proven otherwise. Their fee structure seems more like a communist's states policy on public gatherings. (that is that they are illegal/prohibited) Their revenue distribution favors some groups over the expense of others tossing out any ideas of equality or evenhandedness. Apparent dictatorial management policies with no control of music usage by original authors. Charge/pay-up first and only possibly allow exceptions/refunds later. (maybe)

“,music-makers don't sign over ownership of their music upon joining GEMA, they sign over their usage rights—the right to legally manage and collect licensing fees for playback, reproduction and broadcast of their music”. Whats the difference between ownership and the way they define “usage rights”? This kind of legal nonsense is the same as doublespeak and congressional bill/act naming as neither says/implies what they actually do. Its the same as lying with clever words.

Why pay for a song you could not sing or play? Why pay for a video that anyone could not perform a skit from in public or at work or school? Why pay for a book that one cannot copy and pass-out whole chapters just to discuss pertinent topics within groups? (In person or on the net.) Etc. (rant) We do so only because of the current copyright based monopolies are the only source of such culture. Free market and Public Domain Rights are faltering.

It might be expected that GEMA's revenue from live events will go way down. With such putative fee structure its impossible to see how small live event clubs can survive. Its hard to understand how they can promote music and culture with such policies. Such a policy will likely destroy an entire culture and the industries (clubs, parties, etc) built up around it.

Lets put this in terms closer to home. If one puts on a party and wants either a DJ and or a live band in a cornfield they would have to pay for how much square footage? By their rules they expect a fully sold-out-house/attendance for each venue...

What charges would a street performer pay? The size of the sidewalk or more likely the whole street would be expected to be the size of the venue? Would everyone who walked by have to be considered an audience member even if they hated the music? What life destroying charges or law suits would be inflicted upon the homeless street performers just trying to get a few quarters tossed in a hat?

What about the songs groups of people sing when they get together? What about the songs and lyrics protesters sing or shout out? A lot of this reminds me of the US state of Washington's very draconian dance tax. It would still (not?) be a shocker if GEMA charged more if the audience started swaying to the tune and extra fees if the started to dance.

What is really the worst effect of GEMA's club over-pricing structure is the limiting the basic human activities like freedom of expression and the freedom of association. What is being hurt most are the various cultures that any society supports. Songs, Sining and music are some of the most basic cultural items in existence today. To regulate their usage with fees, taxes and other limitations can be described as cultural insanity.

Small nightclubs with live events must be on someones shiitlist. The likely consequence of this policy is to drive such events underground to invitation only hidden clubs. The
German local (beer) bar scene is a large tourist attraction and in no way can GEMA be helping this industry. None.

GEMA seems to be just another selfish for profit monopoly in business for itself and only for itself. Its increasing demand for a more control and profit might even destroy the very thing it makes money off of.

Of course the real problem is that Germany has similar eternal copyright laws/monopolies. If the terms were much shorter the sharing of culture would be a much more elegant/smoother event.

Reactionary.

PaulT mentions an interesting cultural affect of the licensing structure of charging for each song stored on a DJ's laptop. Diverse culture will end up supporting small slices of pop culture under GEMA rules. Its cultural warfare! Sonic Attack! Run for your soundproof bunkers.

A few corrections

- GEMA is not a for-profit organisation. Every license fee is being distributed to the members.

- top artists get more money because their music is actually used and licensed more and in more places and for higher fees. There's nothing conspiratorial about this, it's the success that puts them and their licenses in this position

- all these flat fee licenses being paid are a terrible thing and we in GEMA resent it wholeheartedly. We want clear per use accountability. It's the licensee that prefer to not pay per use but rather have a flat fee.

Re: A few corrections

OK, then... Just provide citations for all your claims and you can consider the article corrected. Sorry, anonymous comments without citations are not corrections.

Oh, and most people don't care what GEMA members want. If the market is trending towards flat fee subscription services, then that's where it's heading. I know the labels would dearly love to charge multiple Euros for each song, or even their wet dream of pay per listen, but if the consumers don't want that you can't force them to pay in the way you prefer.

Re: Re: A few corrections

We're not competing in a free market and customers have unilaterally chosen to abolish the market altogether when they claimed to "free the artists from oppression" by consuming their work without any compensation whatsoever.

We're competing with assholes lining their pockets on the backs of our products.

Brave new world with such "smart" ambassadors such as yourself.

And if you don't like the music business, why don't you start a label and treat the artists they way you feel is right!

Re: Re: Re: A few corrections

So, you have no facts, just a fantasy where you paint yourselves as the victims and ignore people who actually pay for music? You won't answer the realities of the market (tough shit, I pay for my Spotify subscription, not the €20 CDs you people fantasise about forcing people to buy again). Figures.

Your lies and distortions don't work, so don't pull that crap with me. FACTS or GTFO.

"And if you don't like the music business, why don't you start a label and treat the artists they way you feel is right!"

What an idiotic statement. No, I won't I'll just continue to pay for music in the way I wish from legal sources and pay for the gigs and merchandise I wish to buy. If you don't like that, so what, that's reality - deal with it.

You fail to realize that the piracy issue is what forces us into an incredibly deflationary environment that in the end will hurt you as the consumer.

Yeah, bank on Spotify and prepare for what will happen to your carefully curated playlists once Spotify doesn't work the way _you_ want it to work any longer.

I'll be sitting there laughing my butt off.

And your reality distortion field as to what the revenues as a musician are/have been is incredibly strong. How many parents did you hear tell their children to take up a career as a composer/musician? Ever wonder why that is? Because it's a tough business and that's fine. But nowadays we have to deal with cheapskates such as yourself which is not making this market any better.

Re:

"You fail to realize that the piracy issue is what forces us into an incredibly deflationary environment that in the end will hurt you as the consumer."

..and the answer is to rape clubs so that they can't afford to operate any more, kill off avenue for independent musicians and charge organisations for music they haven't even played?

"Yeah, bank on Spotify and prepare for what will happen to your carefully curated playlists once Spotify doesn't work the way _you_ want it to work any longer."

If Spotify change their business or are forced to shut down, I will use an alternative service, or just revert to other ways of listening to music. I pay for Spotify (among other things) because it's convenient and gives me what I want as a consumer. Taking that away will not make me magically start buying CDs or spend 10x the money to get the same music. Is that through your thick skull yet?

You're a moron if you think that there's only one way to get music, but you're also a moron to demand that people who already pay for music should pay again because your cash cow of selling plastic discs is no longer enriching your beloved industry.

"But go on... dream..."

Judging by your comments in the paragraphs above that sentence, you're the one dreaming. You're living in a fantasy world. You have to invent strawmen to attack because the people you're addressing aren't as easy to attack as you wish they were. Virtually nothing you've accused me of bears any resemblance to fact.

Re: Re: Re:

So, you have nothing? You're not honest enough to answer any of my points, you just have to act like a child and ignore them because I called you a moron (even though I did so in response to your lies about me)? What a surprise.

Why are you people always so dishonest and unwilling to debate reality?